Amazon Spends $14B on Whole Foods

Amazon on Friday announced that it has inked a deal to acquire Whole Foods Market for close to US$14 billion in cash. The agreement includes assumption of Whole Foods’ net debt.

Whole Foods will run as a wholly independent subsidiary of Amazon. It will continue to operate stores under its own brand and source products from vendors and partners.

Cofounder John Mackey will continue in his role as Whole Foods’ CEO, and the company’s headquarters will remain in Austin, Texas.

The deal is expected to close in the second half of the year.

News of the deal sent share prices of grocery chain Kroger — as well as other retail chains that carry groceries, such as Target and Costco — plummeting. However, Whole Foods stock shot up 28 percent.

“Large grocery stores like Kroger and Albertsons will be especially affected,” said Madeline Hurley, senior analyst at IBISWorld.

Amazon’s resources and online channel will make it “a larger threat in the food retailing market,” she told the E-Commerce Times.

Amazon “will be able to compete with large grocers through multiple channels,” Hurley said.

Online Grocery Boom Ahead?

“With the purchasing power that a partnership brings, and the innovation that Amazon has already introduced with its ‘checkout-free’ grocery stores, prices for high-quality organic produce and prepared foods could decline significantly, putting pressure on a low-margin industry,” noted Tom Caporaso, CEO of Clarus Commerce.

“With this merger, Amazon will also be able to invigorate the popularity of a highly fractured online grocery and delivery market, with the rollout of Amazon Fresh nationwide,” he told the E-Commerce Times.

“With the nationalization of its Prime-only delivery benefit, Amazon will be able to further incentivize its premium loyalty program, Amazon Prime, and bring more people into its ecosystem,” Caporaso said.

Online grocery shoppers in the United States buy specific items rather than making large purchases, and they buy online infrequently, according to Fund Global Retail & Technology.

The U.S. online grocery industry is on the cusp of a boom, with the involvement of major retailers such as Walmart and Kroger, suggested Fund Global. This trend is expected to accelerate into 2017.

Advantages to Whole Foods

Whole Foods has been lagging in the move to online commerce — its stores are in urban markets.

“Although Whole Foods only holds 2.7 percent of the market, Amazon’s resources and online channel will make it a larger threat in the food retailing market,” IBISWorld’s Hurley noted.

Amazon “will likely utilize Whole Foods’ existing infrastructure to shake up the brick-and-mortar market,” she said, “while taking advantage of its supply chain to make the online side of the business more cost-effective.”

Amazon and Whole Foods take diametrically opposite approaches to pricing. Amazon tends toward competitive pricing, while some of Whole Foods’ products are so expensive the company has been dubbed “Whole Wallet.”

The high prices have limited Whole Foods’ draw, but if prices are lowered as a result of the Amazon takeover, that could help Whole Foods emerge from the doldrums.

Whole Foods last month shook up its board of directors under pressure from activist investor hedge fund Jana Partners.

The company has launched some lower-cost products under its own “365” brand, and its stores have begun carrying a few clothing and other non-food items. It also has expanded its prepared food business.

Brick-and-Mortar Benefits

“Online grocery sales are expected to continue growing as more consumers trust this channel,” IBISWorld’s Hurley remarked. However, consumers will continue to shop at brick-and-mortar locations.

The Whole Foods purchase “doesn’t necessarily mean Amazon will shift it into an online grocer,” she said.

“Amazon has experimented with the brick-and-mortar format but has struggled to find a plan that works on a grand scale,” Hurley pointed out. The Whole Foods purchase may help it resolve that issue.

SOS Children’s Villages work to prevent family breakdown and care for children who have lost parental care, or who risk losing it. They work with communities, partners and states to ensure that the rights of all children, in every society, are respected and fulfilled.

In particular they do extensive work to protect vulnerable children associated with the gold mining industry in Africa. As such it is incumbent upon the founders of iPayGuru to support such a charity and we encourage you to do the same.

Did you know ?

The Internet is the global system of interconnected computer networks that use the Internet protocol suite (TCP/IP) to link devices worldwide.

Approximately 3.2 billion people use the internet. Out of this, 1.7 billion of internet users are Asians. In fact, it is estimated that approximately 200 billion emails and 3 billion Google search would have to wait if the internet goes down for a day.

30,000 websites are hacked every day. Highly effective computer software programs are used by cybercriminals to automatically detect vulnerable websites which can be hacked easily.

First webcam was created at the University Of Cambridge to monitor the Trojan coffee pot. A live 128×128 grayscale picture of the state of the coffee pot was provided as the video feed.

Internet sends approximately 204 million emails per minute and 70% of all the mails sent are spam. 2 billion electrons are required to produce a single email.

First tweet was done on 21st March, 2006 by Jack Dorsey and the first YouTube video to be uploaded was “Meet At Zoo” at 8:27 p.m. on Saturday, April 23, 2005 by Jawed Karim.

The majority of internet traffic is not generated by humans, but by bots and malware. According to a recent study conducted by Incapsula, 61.5% or nearly two-thirds of all the website traffic is caused by Internet bots.

In 2005, broadband internet had a maximum speed of 2 Megabits per second. Today, 100Mbps download speeds are available in many parts of the country. But experts warn that science has reached its limit and fiber optics can take no more data.

The first spam email was sent in 1978 over ARPNET by a guy named Gary Thuerk. He was selling computers.

Online shoppers can buy cars, clothes and millions of other things with the click of a button and figurative swipe of a credit card. In fact, U.S. consumers spend $1,200-$1,300 per year online, but that number will increase by 44%, to $1,738, by 2016. In that year, ecommerce sales are expected to hit $327 billion.

By 2016 the total transaction value of mobile payments in the U.S. hit $62.24 billion. The user base is still relatively small, with only 7.9 million users in 2012. Usage should grow during the next few years to over 50 million mobile payment users by 2017.

51% of people who did not complete a purchase on a mobile device stopped because they did not feel comfortable entering their credit card details

81 percent of people research online before buying it either offline or online.

Only 60 percent of people use search engines to search the products, the rest 40 percent directly land on the ecommerce portals or have direct links

An average online shopper visits the target platform at least 3 times before finalizing the product.

33 percent of online sales take place after 6PM, likely due to the fact that people get back from offices around then, giving them some private time to think of themselves and their needs.